Over the last six weeks, a tenant’s market has become a landlord’s market in prime London as supply has fallen and demand has hit record highs.
Supply has been curtailed as would-be landlords have sold to capitalise on surging demand in the sales market and as staycation rules have been relaxed a number of investors have returned their properties to the short-term rental market.
In addition, the return of overseas students and the re-opening of offices has driven the demand side of the equation.
These factors have contributed to upward pressure on prices, with average rents in prime central London rising by 1.2% in the three months to August, the biggest such increase since July 2018. In prime outer London, the quarterly gain of 0.9% was the largest since June 2018.
As shown in the below chart, of the properties rented, the areas around London’s two main financial districts (the City and Canary Wharf) showed the greater activity with 28% of listings rented in August in comparison to 22.5% for Greater London, a figure that was at 13% at the start of the year for both groups. This divergence shows the clear trend that the re-opening of offices has been driving lettings activity.
When it comes to the price of renting luxury real estate, Hong Kong is still on top.
The city retains its title as the world’s most expensive city to rent a luxury apartment, according to a report from Knight Frank. The report examines the cost of a three-bedroom apartment in a central location across eight different cities.
Prime rents in Hong Kong stood at $6.70 per square foot at the end of 2020, and a monthly budget of $10,000 would get a renter less than 1,500 square feet of space. In New York City, which ranked No. 2, the same budget would get a renter 2,249 square feet of space.
Singapore, London, and Sydney respectively follow behind Hong Kong and New York City when it comes to the cost of renting a luxury apartment.
One of the key reasons people choose to rent in expensive locations is due to raised purchase, ownership and sales costs in recent years.
As an example, foreign buyers looking to purchase in markets such as Hong Kong and Singapore would have to pay between 15% and 20% in additional stamp duties on top of existing rates for domestic buyers, making renting a more attractive option.
Prime renters also seek flexibility and an the opportunity to ‘try before they buy’.